# EUR-Lex - 52013DC0350 - EN

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# 52013DC0350

**COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS 2013 EUROPEAN SEMESTER: COUNTRY-SPECIFIC RECOMMENDATIONS MOVING EUROPE BEYOND THE CRISIS /* COM/2013/0350 final */**

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COMMUNICATION FROM THE COMMISSION TO
THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL
COMMITTEE AND THE COMMITTEE OF THE REGIONS

2013 EUROPEAN SEMESTER: COUNTRY-SPECIFIC
RECOMMENDATIONS
MOVING EUROPE BEYOND THE CRISIS

1.
Introduction

Once a year the Commission reviews the
economic and social performance of each EU Member State and makes
country-specific recommendations to guide national policies in the coming year.
Against the background of a deep economic and financial crisis, which is
causing social hardship for many, and recent forecasts which show that the EU
is slowly recovering from a protracted recession, this year's recommendations
will receive particularly close scrutiny.

The purpose of regular surveillance by the
Commission is:

·
To identify the major economic and social
challenges for the EU and the Euro area, reflecting the growing interdependence
between our economies.

·
To assess progress, pick up warning signs of
problems earlier than in the past and through recommendations to guide Member
States to implement their policies in ways that help the EU to adjust and grow
sustainably, providing jobs and decent living standards for all its citizens.

The Commission's analysis presented
alongside the 2013 recommendations shows that the EU is making lasting changes
and is tackling the serious structural problems that built up over the last
decade. These changes are taking place against a global backdrop of the need
for reform in the most advanced economies and strong economic development in
the emerging economies. Member States are engaging in necessary reforms and
working hard to get public finances under control. The pace and impact of these
efforts varies across countries – adjustment is particularly noticeable in the
programme countries and the more vulnerable Member States. The challenge is to
implement agreed reforms, sometimes with greater urgency and more ambition.
Where the Commission feels that stronger measures are needed, these are set out
in the recommendations.

Over the last five years, efforts have been
concentrated on crisis management, restoring financial stability and securing
the Euro as the prerequisites for future growth. In the short term, recovery is
hampered by the high levels of debt – both public and private – accumulated in
many Member States and because the repair of the banking sector is slow to bear
fruit. Moreover, the size and urgency of the imbalances built up over several
years have led to significant adjustments which now have to be carried out
simultaneously across Europe, with a strong interdependence between the EU
economies.

Finding a more sustainable growth path
takes more time than is desirable. The impact on society of several years of
low or no growth is far-reaching, with very high levels of unemployment and
rising poverty in several parts of Europe. The level of inequalities and the
issue of fairness are now at the centre of public debate, showing that to be
successful policies need not only to be well designed but to have political and
social support. The dim prospect for labour market improvements in the short
term will be a further test for the welfare systems of the Member States. It
will take time for the positive effects of today's decisions to work their way
through into a more dynamic, growing, job-creating economy.

Europe needs fiscal consolidation –
sustainable growth cannot be built on unsustainable debt – and Europe needs real growth so that people can find sustainable employment. The issue of youth
unemployment requires specific and urgent action. Since the current crisis is
structural as well as cyclical, the pace of reforms needs to be stepped up
across the EU to secure recovery and ensure the rebalancing of the economy.
"Deficit" countries need to boost their competitiveness and "surplus"
countries need to remove the structural obstacles to the growth of their
domestic demand.

Structural reforms can be difficult but
they help to spread the burden of adjustment and the benefits more evenly
across society. Reducing red tape for business helps to foster a
business-friendly environment, reducing the cost of services helps low income
groups and more efficient public administration delivers better quality, more
affordable social services. There is a need for much stronger support measures
for the unemployed, notably the long-term unemployed, to help them get the
skills or guidance needed to get new jobs, as well as for youth, to help them
succeed in the transition from education to work. There is a need to find
solutions for businesses with solid business plans that cannot get financing.
There is a need across all Member States for greater investment in the
performance of the education system, in equipping people with the skills needed
for the twenty first century economy and for boosting innovation and
competitiveness.

The ECB's action has decisively contributed
to removing perceived risks to the stability of the Euro area. However, the
transmission of lower interest rates and the restoration of normal lending to
the economy, especially in the periphery of the EU are still impaired. Completing
the architecture of the Economic and Monetary Union (EMU), particularly the
Banking Union, will be essential for underpinning future sustainable growth and
preventing the re-emergence of imbalances.

The Commission's analysis of national
reform programmes clearly shows that Member States could do more to help
themselves get back to growth and move Europe beyond the crisis. To varying
degrees, failure to remove obstacles and to seize opportunities, resistance to
change and the lack of a sense of urgency in some countries all contribute to
an environment which does not help business to flourish and to create jobs.
Delays in tackling necessary reforms will only increase their ultimate
financial, economic and social costs. The scale of these challenges calls for
all stakeholders, including the social partners and civil society, to work
together to develop and implement the right responses. Preserving and deepening
the European single market will be essential to achieving these common goals.

2.
Overall
assessment

The challenges the Union is facing are
complex and can only be met by a comprehensive response that brings together
the EU and national levels of policy-making and implementation. This is a major
objective of the European Semester process.

The detailed analysis which underpins this
package shows that:

·
A rebalancing of the EU economy is taking
place. Wide-ranging reforms have been pursued or
initiated in recent years – to correct past imbalances and shift the economy
onto a more sustainable path. The large and persistent current account deficits
witnessed in several countries have been significantly reduced, lowering the
risk of sudden interruptions in the external financing of these economies.
While some of these reforms will take time to produce their full effects,
improvements are already visible across Europe, for instance in terms of export
performance or the interest rates paid on sovereign debt.

·
Unemployment, including youth and long-term
unemployment, has reached unacceptably high levels
and it is likely to remain high in the near future, calling for determined and
urgent action. Reforms have been undertaken to improve the resilience and
flexibility of the labour market in several parts of Europe but they will take
time to deliver new jobs across the economy.

·
Fiscal consolidation is on-going and is helping to bring public finances back under control. Still,
the ageing profile of many Member States represents a challenge to their future
financial sustainability in terms of pensions and health care, so action is
needed now in order that Europeans can continue to enjoy high standards of
living in the future.

·
Structural reforms are essential to kick-start growth and serve the dual goal of reducing unemployment
and restoring the sustainability of public finances. Restoring competitiveness
at home is also key to seizing growth opportunities world-wide.

A number of policy lessons can be drawn
from the analysis:

·
Further measures are needed to address high levels
of public and private debt in many Member States, and the process of
deleveraging of over-indebted economies must be pursued and carefully managed.
As the lending surveys of the ECB show, improving the health of the banking
sector further so that it can channel funding into the productive parts of the
economy, in particular to SMEs, is a priority. New schemes which provide
financing to the real economy, developed by the Commission and the EIB with the
involvement of the ECB, could play an important role here. Investment funding
from the EU's structural funds will play a crucial role in parts of the EU in
the coming years. Promoting alternative sources of financing and reducing
companies' traditional dependence on bank financing is also essential to restore
normal lending to the economy.

·
Member States with high levels of unemployment
need to step up active labour market measures, such as training and employment
services. Further reforms to facilitate access to employment, prevent early
withdrawals from the labour market, reduce the cost of labour and combat labour
market segmentation are recommended. The social partners have a key role to
play in helping to shape and deliver these policies. The situation of
unemployed young people is particularly worrying and action is recommended
along the lines of the EU Youth Guarantee proposed by the Commission and now
agreed by the EU Member States.

·
Member States need to do more to boost the
competitiveness of their economies. Labour costs play an important role and must
be kept in line with productivity growth and will continue to be under close
scrutiny. Greater competition in product and services markets is also essential
to enhance the productivity levels of the economy and lower prices. At the same
time, Europe cannot and will not compete in the global economy merely on costs.
Prior to and during the crisis the necessary investment has not been made
across all Member States in education and skills, research and innovation and
resource efficiency. Lack of the right skills, products and services poses a
serious threat to Europe's future growth prospects so rapid, remedial action is
needed in these areas, in line with the Europe 2020 goals.

·
Greater efforts are urgently needed to create
conditions that favour business development, the consumer environment and
employment creation – for example, substantial improvements are still needed in
the functioning of network industries, competition in key service sectors, such
as retail, the need to provide for easier access to certain professions and
activities, as well as on the effectiveness of public administration.

·
Member States with current account surpluses and
sufficient fiscal space could do more to reduce the high taxes and social
security contributions that they levy on low wages. Recent wage developments in
"surplus" countries are contributing to sustaining demand and also
have a positive spill-over elsewhere in the EU. These Member States could also
boost domestic demand by opening up their services sector through the removal
of unjustified restrictions and barriers to entry, thereby making services more
affordable for lower income groups and promoting new investment opportunities.

·
In the light of the real progress made in reducing budgetary deficits, the degree of consolidation
that has already taken place and weaker-than-expected economic activity, the
Stability and Growth Pact allows for additional time to be granted to Member
States, in certain cases, to reach a deficit level below 3% of GDP. However,
backtracking on necessary consolidation is not an option and some Member States
still face significant adjustment needs. For a number of them, the Commission
is proposing extra time to correct their excessive deficits. This extra time is
not being proposed to relax efforts – on the contrary, it is to be used to
reduce the structural budgetary deficit, intensify reforms and pave the
way for sustainable recovery.

·
More can and should be done to improve the
efficiency of public expenditure and the fairness and effectiveness of the tax
system as part of medium-term fiscal strategies. The inefficiency that is built
into the design of some national tax systems (for example some reduced rates
and other tax exemptions) needs to be tackled. Stepping up the fight against
tax fraud and evasion is also necessary. While priorities differ, several lines
of action are recommended to this effect.

·
Fairness is essential for the sustainability and
effectiveness of reforms. The crisis has already had a lasting impact on the
most disadvantaged within our society, with the share of people at risk of
poverty increasing in many countries. Member States need to invest in their
human capital and in providing their citizens with adequate services. There is
a need for greater attention to the distributional impact of reforms to ensure
that they produce lasting results for the benefit of all. Several Member States
need to pay more attention to combating different forms of poverty – child
poverty, homelessness, in-work poverty and over-indebtedness of households –
and to ensure the effectiveness of the welfare systems that deal with those
affected.

Decisions already taken at EU level have
contributed to Member States' reform efforts but further urgent action is
needed:

·
Member States, which experienced major financial
distress, could make use of financial backstops newly created at EU level[1]. Where EU/IMF financial
assistance was granted, it is subject to strong conditionality. The
implementation of these programmes is on track and is closely monitored.

·
Several pending proposals for EU legislation
have the potential to unlock growth and job opportunities, for instance in the
field of services and by exploiting the digital economy. The Commission will
report on progress made as part of the Compact for Growth and Jobs at the June
2013 European Council.

·
The Commission proposed a Youth Employment
Package in December 2012 which includes the setting up of a European Alliance
for Apprenticeships.  It also proposed a Youth Guarantee to ensure that all
young Europeans get a good quality job offer, further education or training, an
apprenticeship or a traineeship within four months of leaving school or
becoming unemployed. This Youth Guarantee was adopted by the Council in April
2013. As part of the next multi annual financial framework EUR 6 bn has been
earmarked, to work alongside the European Social Fund, through a Youth
Employment Initiative to support the Youth Guarantee. Since 2012 the Commission
has been working through Youth Employment Action Teams to help the Member
States with the highest levels of youth unemployment to reprogramme EU
structural funding to target it on young people. It is also leading a
multi-stakeholder partnership to tackle the lack of ICT (information and
communications technologies) skills in the EU and to fill the projected several
hundred thousand vacancies for these skills.

·
EU economic governance has been strengthened
through recent legislation. Its implementation will enhance the credibility of
the on-going reform process. The Treaty on stability, coordination and
governance in the EMU is now applicable. The Stability and Growth Pact was
reinforced and the new Macroeconomic Imbalances Procedure is in place
("six-pack"). New legislation strengthening the coordination of
policies within the Euro area ("two-pack") will enter into force on
30 May 2013.

·
Further steps to deepen the EMU, notably through
the establishment of a Banking Union and completing the toolbox of financial
backstops provided by the European Stability Mechanism, will strengthen the EU
framework further. Discussions are also taking place on ways to reinforce the
social dimension of the EMU.

·
As soon as agreement can be reached on the next
EU multi-annual financial framework, a new generation of EU financial
instruments – such as Horizon 2020 for research and the Connecting Europe
Facility for infrastructure – can be launched in support of the Europe 2020
Strategy for smart, sustainable and inclusive growth. Greater targeting of the
EU structural funds on growth, competitiveness and employment can produce a
powerful growth stimulus in several Member States, where a large part of public
investment is co-financed by the EU budget. This year's country specific
recommendations are particularly important because Member States and regions are
now defining their investment priorities for cohesion policy 2014-2020.

3.
Key
action strands

The European Semester starts with the
publication by the Commission of its Annual Growth Survey. For 2013 the
Commission maintained the same five priorities as for 2012:

·
Pursuing differentiated, growth-friendly fiscal
consolidation

·
Restoring normal lending to the economy

·
Promoting growth and competitiveness for today
and tomorrow

·
Tackling unemployment and the social
consequences of the crisis

·
Modernising public administration.

The European Council endorsed these priorities in March 2013 and set
the framework for Member States' action in these areas. Annex 1 provides an
overview of the recommendations for each Member State as part of this package.
Annex 2 summarises progress towards the Europe 2020 targets. More background
information is available in the staff working documents and comparative
thematic fiches published on the Europe 2020 website.

The Commission has also made recommendations for the Euro area. The
Eurogroup should play an active role in strengthened surveillance of the Euro
area by ensuring a coherent overall policy stance and the implementation of
reforms needed for the stability and growth of its economy. The Eurogroup will
also play a particular role in discussing and coordinating policy reforms
"ex ante" in future, as well as in the rapid delivery of essential
policy decisions, such as those required for the transition to the Banking
Union.

This package of recommendations also builds on the in-depth reviews
published by the Commission on 10 April 2013 as part of the Macro-economic
Imbalances Procedure. The country-specific recommendations proposed for the 13
Member States covered by this procedure take these imbalances into account.

Pursuing differentiated, growth-friendly
fiscal consolidation

Fiscal consolidation is not an end in itself but a means for public
authorities to regain their fiscal sovereignty to be able to invest in
sustainable growth. Against the background of high public deficits and rising
debt levels, the Commission has been advocating the need for fiscal
consolidation, which should take place in a differentiated and growth-friendly
manner, specific to each couuntry.

Fiscal displine and growth are mutually supportive provided that the
right measures are taken. A recent example is provided by the Baltic countries:
following deep recessions, Lithuania, Latvia and Estonia are now registering the highest economic growth rates in the EU at 3.6%, 5.6% and
3.2% in 2012 respectively. These three countries have frontloaded fiscal
consolidation and rebalanced their economies in a very uncertain environment.
The marked improvements in their competitiveness positions are now bearing
fruit, helping them to consolidate their public finances and reduce
unemployment further, although the high levels of risks of poverty and social
exclusion remain sources of concern.

Fiscal consolidation is progressing all
across Europe. The EU deficit declined from a peak of  -6.9% in 2009 to -4% in
2012 and is expected to fall to -3.4% in 2013, with a growing number of Member
States having corrected their excessive deficits. The consolidation paths
towards the deficit and debt targets which can take Member States out of the
excessive deficit procedure are based on deficits measured in structural terms.
Therefore if a significant deterioration of the economic outlook leads to
missing the nominal target in spite of implementing the required structural
effort, the deadine for correcting the excessive deficit may be postponed. In
line with the agreed EU framework, the pace of fiscal consolidation was already
adjusted in the recent past for Greece, Spain and Portugal, giving them more
time to correct their excessive deficits. The Commission is now updating its
recommendations based on the latest information and having assessed the
effectiveness of the measures being taken by the Member States (Box 1).

Box 1. Situation of Member States with regard to the Stability and Growth Pact, as recommended by the Commission on 29 May 2013

No excessive deficit procedure || BG, DE, EE, FI, LU, SE

Abrogation of the excessive deficit procedure || HU, IT, LT, LV, RO

On-going excessive deficit procedures with 2013 deadlines || AT, DK, CZ, SK

On-going excessive deficit procedures with other deadlines - 2015 or 2016 || EL, IE, CY, UK

Proposed extension of deadlines to meet fiscal objectives – new deadlines of 2014, 2015 or 2016 || ES, FR, NL, PL, SI, PT

First step towards the opening of an excessive deficit procedure || MT

Insufficient action to correct excessive deficit by 2012 – excessive deficit procedure stepped up || BE

Thanks to action taken at EU level and the efforts of a number of
Member States, interest rates on sovereign debt have gone down and several
countries once threatened by unsustainably high refinancing costs are now able
to finance their debt at a much lower rate than a year ago. However, given
already high levels of debt and the costs associated with an ageing population,
their fiscal and financial situation remains fragile.

Against this backdrop, giving more time for certain Member States to
meet their agreed objectives is designed to enable them to accelerate efforts
to put their public finances into order and carry out overdue reforms. Reform
efforts must be stepped up to credibly produce the required outcomes within the
new deadlines and excessive deficits must be corrected. The Commission will
monitor the situation closely and use the strengthened fiscal governance
arrangements for the Euro area countries. Fiscal institutions should be
strengthened, at both national and sub-national levels, by implementing
credible and effective medium-term budgetary frameworks.

The nature of the fiscal consolidation also matters. In many cases,
taxes have been raised instead of expenditure being reduced. This is generally
more damaging to growth than the reverse, especially in countries with already
high levels of taxation. The Commission recommends ways of making fiscal
adjustment more growth-friendly, by acting on both the revenue and spending sides
of national budgets.

On the revenue side, the structure of tax systems, and particularly
the shifting of the tax base from labour to other sources, is an essential
aspect of on-going reforms. A priority for many Member States is to limit
labour taxation in order to raise incentives to work and reduce the relatively
high cost of labour, in particular for low-skilled workers (see Box 2). Obviously these much needed reforms must then be compensated for financially by other
sources of revenue. Increases in recurrent property taxation meet with
political objections in several Member States but can be designed to be
effective and fair ways of raising public revenue. Another facet of tax shift
is towards environmental taxes, for example by taxing sources of pollution and
greenhouse gas emissions. These can stimulate the development of new
technologies, promote resource efficiency and the creation of "green"
jobs, but the impact of high energy prices on households and on
competitiveness, including on energy intensive industries, also needs to be
monitored so that future decisions can be taken on the basis of sound evidence.

Greater efficiency and fairness of tax systems can be achieved by
broadening the existing tax bases. Most tax systems contain exemptions, allowances,
reduced rates and other specific regimes, known as "tax
expenditures". These are not always justified and can be inefficient tools
for achieving their social, environmental or economic objectives. They may also
introduce differentiated tax treatment between tax payers that is not always
justified and thus reduce the fairness of the system. They can also create
opportunities for manipulation and make the system more complex and increase
compliance and administrative costs. In several Member States, taxes have been
increased but the Commission considers that more could be done to reduce tax
expenditures and exemptions, including environmentally and economically harmful
subsidies.

For example, VAT revenue actually collected represents only half the
amount that the full application of the standard VAT rate would produce (Graph
1). The difference is a reflection of the extent of tax breaks, tax loopholes,
lack of compliance and in some cases poor tax administration, which reduce the
effectiveness of the VAT system.

Graph 1. Actual VAT
revenue in 2011 (% of theoretical revenue at standard rates)

Source: European
Commission. The VAT revenue ratio consists of the actual VAT revenues collected
divided by the product of the VAT standard rate and the net final domestic
consumption. The high value for Luxembourg is explained by the importance of
the VAT collected on the sales to non-residents.

Actions to improve tax compliance and fight fraud are essential to
increasing the effectiveness and fairness of the taxation system[2]. National, EU level and global
actions can all interact here to strengthen taxation systems. The Commission is
determined to use all tools at its disposal to step up the fight against fraud
and evasion and invites Member States to take measures at domestic and EU level
in coordination with other Member States.

Box 2. Examples of recent measures to shift the tax burden
away from bases that are distortive to growth

BE has taken some measures to decrease the
social contributions for SMEs and for certain categories of employees. A
"work bonus" for the low-paid has been introduced and reinforced by
reducing employers' social contributions, coupled with a personal income tax
credit. DK is gradually decreasing the tax burden on labour to boost employment
and growth. HU has reduced social security contributions for selected target
groups. FI has increased basic allowances to ease taxation on low income
earners. CZ and EE have planned overall reductions of the tax burden on labour.

On the expenditure side, the Commission is
of the view that public investment in research, innovation and human capital
should be given priority, including through greater cost-efficiency of
spending. There is cause for concern in some Member States showing low or
decreasing levels of investment in education (for example, BG, EL, IT, SK and
RO). There is also scope to maintain or improve the coverage and effectiveness
of employment services and active labour market policies, such as training for
the unemployed and youth guarantee schemes, as well as to improve the
cost-effectiveness of public spending in many areas, including healthcare and
long-term care.

The ageing of the population poses a
challenge to the sustainability of public finances, through a potential rise in
the cost of healthcare and of state-funded pensions. To help meet this
challenge by taking action now, the Commission has been recommending increasing
the minimum statutory retirement age in line with the increase in life
expectancy, as well as phasing out early retirement schemes, in combination
with efforts to sustain lifelong learning and the employment rate of older
workers. Table 1 summarises recent and announced changes in the pensionable age
by Member State.

Table 1. Pensionable age* across the EU

|| Pensionable age in 2009 || Pensionable age in 2020 || Further increases after 2020 || || || Pensionable age in 2009 || Pensionable age in 2020 || Further increases after 2020

W = women (if different) || W = women (if different) || || || W = women (if different) || W = women (if different)

BE || 65 || || 65 || || || CY || 65 || || 65+ (3) || ||

BG || 63 || W: 60 || 65 || W: 63 || || LV || 62 || || 63y9m || || 65 in 2025

CZ ||   62         W: 56y8m (1) || 63.8      W: 60y6m (1) || 67+ (2) in 2044 || LT || 62y6m || W: 60 || 64 || W: 63 || 65 in 2026

DK || 65 || || 66 || || 67+ (3) || LU || 65 || || 65 || ||

DE || 65 || || 65.7 || || 67 in 2029 || HU || 62 || || 64 || || 65 in 2022

EE || 63 || W: 61 || 64 || || 65 in 2026 || MT || 61 || W: 60 || 63 || || 65 in 2026

IE || 66 || || 66 || || 68 in 2028 || NL || 65 || || 66y8m || || 67+ (3)

EL || 65 || W: 60 || 67 || || 67+ (3) || AT || 65 || W: 60 || 65 || W: 60 || 65 in 2033

ES || 65 || || 66y4m || || 67+ (3) || PL || 65 || W: 60 || 67 || W: 62 || 67 in 2040

FR || 60(1) || || 62 (1) || || || PT || 65 || || 65 || ||

IT || 65y4m   W: 60y4m || 66y11m || 67+ (3) || RO || 63y4m || W: 58y4m || 65 || W: 61 || 65 / 63 (W) in 2030

Source: European Commission * Age at which people can first draw full benefits without actuarial reduction for early retirement. Information based on legislation adopted by 30 April 2013. (1) Minimum age, varies depending on conditions such as number of children raised or minimum insurance period completed (2) To increase by 2 months annually until further amendments (3) Future adjustment to life expectancy gains (4) Flexible retirement age linked to benefit level || SI || 63 || W: 61 || 65 || ||

SK || 62       W: 57y6m (1) || 62+ (3) || || 62+ (3)

FI || 63-68 (4) || 63-68 (4) ||

SE || 61-67 (4) || 61-67 (4) ||

UK || 65 || W: 60 || 66 || || 67 in 2028

In the area of health and long term care
the challenge is to balance the need for universal care with increasing demand
from an ageing population, technological developments and growing patient
expectations in all age groups. Over 70% of the projected increase in
age-related public spending is due to health and long term care. Reforms are
needed to achieve more efficient use of limited public resources and access to
high quality care.

Restoring normal lending to the
economy

Lending
conditions, notably in countries under financial stress, remain tight and the
supply of credit is limited despite the massive support provided by governments
and the accommodative monetary policy of the ECB. The situation has worsened
particularly in Greece, Ireland, Portugal and Slovenia but also in France, Italy and the UK. Germany is the only country where SMEs are reporting a positive
improvement in bank loan availability. Credit to SMEs in some countries is
affected by investors' concerns regarding the weak economic and financial
environment. Moreover, the on-going repair of the banking system is not yet
complete. The cleaning of bank balance sheets remains a priority in several
Member States to restore normal lending to  the most productive parts of the
economy.

Graph 2. Credit conditions
remain tight and credit markets are fragmented

Credit conditions in the euro area ECB Bank Lending Survey

Interest rate spread between smaller and larger loans to non-financial corporations

Given the
previous levels of unsustainable public and private indebtedness, the ongoing
correction in the financial sector is necessary. However, the adjustment should
not overshoot what is necessary or be made worse by badly functioning, fragemented
markets. Therefore public policy should work to reinforce the banking sector,
helping to remove obstacles to corporate financing and investment in
infrastructure.

The focus has
shifted from raising capital to removing vulnerabilities in the banking sector.
EU wide harmonised asset quality reviews should be pursued as part of restoring
trust in EU banks and provide transparency on banks’ assets and liabilities.
This should allow the identification of any remaining pockets of vulnerability
and reinforce confidence in the sector as a whole.

Putting a
European-level Banking Union in place, with a single supervisor and a single
resolution mechanism, will be an important part of completing the overhaul of
the financial sector and restoring normal lending. The recapitalisation of
those banks that need it should be completed rapidly so that the new single
supervisory mechanism can become fully operational and be subsequently
complemented by a single resolution mechanism.

Developing alternative sources of financing
of the economy, less dependent on bank financing, must be a priority. There are
indications of a gradual shift in firms' financing towards capital markets, but
the trend is too slow to produce a near term impact. Moreover, SMEs often do
not have direct access to capital market financing. Initiatives such as new EU
frameworks for investment in venture capital and in social entrepreneurship
funds have been agreed and will ease the situation. Moreover, the paid-in
capital of the EIB has been increased by EUR 10 billion, which should help to
unlock up to EUR 180 billion of additional investment across the EU. This
additional funding will allow significant extra lending to SMEs and which
should cover a wide geographic and sectoral spread. The pace of EIB lending, in
particular for SMEs, must be stepped up as a matter of urgency.

A number of other measures should be
prepared at EU and Member State level to facilitate SMEs' access to bank and
non-bank financing, such as improving the framework for venture capital,
dedicated markets for SMEs and SME pooling, new securitisation instruments for
SMEs, setting up standards for credit scoring assessments of SMEs and promoting
non-traditional sources of finance such as leasing, supply chain finance or
crowd funding.

The European Compact for Growth and Jobs of
June 2012 highlighted the importance of investing in infrastructure and pointed
to the role of the EU's structural funds and the EIB in this area. The Project
Bond initiative launched in November 2012 can play a useful role in re-opening
debt capital markets in Europe to infrastructure finance. It now needs to be
expanded and developed together with other debt instruments under the
Connecting Europe Facility (2014-2020). In March 2013 the Commission also
launched a Green Paper on long term financing[3]
inviting stakeholders to submit their views on how to improve financing of the
real economy and remove obstacles to long term investment.

Box 3. Examples of recent efforts to facilitate access to finance for
businesses

To address tight lending conditions DK has
taken initiatives, including creating a state investment fund (Danish Growth
Capital) and a development and credit package. Another scheme provides credit
guarantees for smaller bank loans 2013-2015. The Estonian government is
supporting company financing through the KredEx, Enterprise Estonia and the Estonian Development Fund. Poland put a new SME guarantee and created a new
growth fund of funds with the European Investment Fund and BGK to stimulate
investment in venture capital, private equity and mezzanine funds. In Italy recourse to non-bank funding has been encouraged including through allowances for new
corporate equity, the creation of a Fund for Sustainable Growth and the
introduction of crowd funding for innovative start-ups. The UK has established the Funding for Lending Scheme, in which banks are able to borrow more
cheaply from the Bank of England providing that they use some of the money to
lend to businesses. EU structural funds and the action of the EIB are
supporting several of these schemes.

Member States, such as Sweden, the Netherlands and the UK, need to manage the level of private debt and the vulnerability
of households faced with possible shifts in the real estate market[4]. Some measures have been taken,
for instance on the regulatory side and on reducing tax incentives towards
indebtedness, such as tax reliefs on mortgage interest payments. Measures to
address imbalances caused by high household indebtedness and high house prices are
also producing positive results by reducing the impact of risky loans. Member
States should also address the bias that currently exists in the majority of
corporate tax systems in favour of indebtedness.

Promoting growth and competitiveness
for today and tomorrow

Many Member States are experiencing a reduction in public and
private investment[5]
and an increase in savings rates, driven by the desire of companies and
households to reduce existing debt levels and/or increase asset holdings. While
necessary on the part of individual companies and households, this tends to
reduce aggregate demand and calls for a comprehensive set of reforms in product
and labour markets to reduce the negative impact on growth and to boost longer
term growth potential.

Frontloading growth and regaining competitiveness is essential for a
successful and lasting recovery. As shown by the recent export performance in Ireland, Spain and Portugal, major adjustments to improve cost and non-cost competitiveness are
producing positive effects, already in the short term.

"Deficit" Member States need to reallocate resources, away
from non-tradable sectors (such as housing) to tradable sectors. They need to
reinforce competition in general, opening services and non-market services
including network services. "Surplus" Member States can and should
boost domestic demand, for example by reducing the high taxes and social
security contributions they levy on low wages. Recent wage developments and
resilient labour markets in "surplus" countries will contribute to
boosting domestic demand and also have a positive spill over effect elsewhere
in the EU. These Member States could do more to open up their services sector
by removing unjustified restrictions and barriers to entry, increasing
investment, making services more affordable for lower income groups.

In the recent past, the competitiveness of a number of Member States
has been hampered by wage increases which outstripped productivity trends. For
these Member States, the Commission had recommended reviewing wage-setting
mechanisms to align wages with productivity developments, and efforts have been
made in this direction. Some Member States have undertaken legislative reforms
or introduced incentives to make such a link. In other cases wage indexation
schemes have been partially reformed or their application has been frozen but
the structural reforms needed to link wage developments with productivity on a
permanent basis are still missing. While country-specific recommendations have
been maintained for 2013, they have been reformulated to take account of
changes that are being made.

Europe clearly
needs to step up its innovation efforts and continue to shift production
patterns towards high value added activities. According to the latest edition
of the Commission's Innovation Union scoreboard, there is still a significant
gap between those Member States with the weakest innovation performance (BG,
RO, LV, PL) and those with the strongest (SE, DE, DK, FI). This places the EU
as a whole behind some of its key competitors.

Weak productivity results partly from
limited competition in products and services markets, but also from poor
performance in education and research, and the inability to transfer research
results into goods and services for the market place. A significant share of
publicly funded private R&D is done through direct grants. Alternative ways
of supporting innovation capacities, such as tax incentives to boost private
funding and the strategic use of public procurement, should be developed.

The large
economic and jobs potential of the services sector remains untapped. The
Commission estimates that EU GDP could be boosted by between 0.8% and 2.6% if
Member States were to remove restrictions on the provision of services in line
with the Services Directive. Under the most ambitious scenario, the highest
gains would be obtained in CY, ES, UK, LU, NL, DK, AT, SE and FR[6]. Concrete measures are
recommended to improve competition in the services sector, by removing barriers
in retail and excessive restrictions in professional services and regulated
professions in particular. The full implementation of the EU Services Directive
can play an important role in the development of cross-border services and help
to increase productivity on domestic markets.

Improving the business environment, more generally, is a priority
and several positive steps have been taken (see Box 4). Some of these good
practices could be taken up more widely.

Box 4. Examples of measures taken to develop economic activities in the
services sector

Regulations prescribing
company form or requiring capital ownership have been made less stringent in Poland, Germany, France, Cyprus and Italy since the Services Directive came into force. The need for
prior authorisation to set up businesses has now been abolished for a number of
services in Italy and several in France. In the retail market, it is no longer
necessary to undergo an economic test to open certain premises in Spain and Germany. Malta has also abolished compulsory tariffs for regulated professions, allowing
businesses to set their own prices.

A supportive business environment is needed to encourage new
start-ups and allow existing firms to grow and attract investment. While some
improvements have been made in the business environment in the last five years
the situation still varies widely across Member States. Spain has an ambitious plan to reduce administrative burden – if the draft law on Market
Unity is implemented as proposed it could add 1.28% to GDP in the first year. A
major simplification plan has been announced in France and significant progress
has been made on e-procurement in Portugal and Lithuania.

The quality, coverage and affordability of network industries are
essential for the competitiveness of the economy. Several recommendations
relate to the development of broadband, improved functioning of the energy market
and improvements in the transport sector (railway, airport, ports, road
transport). The development or refurbishment of major infrastructures, in line
with EU priorities, should remain an important source of activities. The
railway market is most open in Denmark, Sweden and the UK which have all seen a growing market share for rail.

The job creation potential of the green economy is not fully tapped.
Resource efficiency makes economic and environmental sense and is an integral
aspect of our future competitiveness. Member States should step up these
investments as part of modernising production methods in a more sustainable
way. Energy efficiency measures are lagging behind, in spite of their positive
impact in terms of jobs and financial savings for businesses and households[7]. Reducing CO2 emissions,
notably from the transport and construction sectors, remains a clear priority,
in line with EU commitments. The potential of the waste and recycling sector
should be taken up. It has been estimated that the full implementation of EU
waste legislation would save EUR 72 billion a year, increase the annual
turnover of the sector by EUR 42 billion and create over 400,000 jobs by 2020[8].

Tackling unemployment and the social
consequences of the crisis

The crisis has had a severe and lasting impact on levels of
unemployment and the social situation in many parts of Europe. Social
protection systems have helped to cushion the worst social consequences of the
crisis although some of them are now coming under strain due to the duration of
the crisis. Yet, as shown in Table 2 below, there is an increasing disparity
across Member States. In several of them unemployment levels have increased
sharply, and the numbers of unemployed reach very high levels. The unemployment
situation of young people (with an unemployment rate of 23.5% on average but
55.9% and 62.5% in ES and EL respectively) and the increasing proportion and
number of long-term unemployed (from 4.1% in 2011 to 4.6% of the labour force
in 2012) are particularly worrying.

However some Member States display a robust employment performance. Austria has the lowest unemployment rate in the EU, at 4.7 % in March 2013, while its
overall participation rate has slightly increased to over 75%. In Germany, unemployment decreased from over 8% to 5.4% in just a few years. In the UK, the overall unemployment rate has decreased from 8.2% in 2011 to 7.7% in February 2013.

Major labour market reforms aiming at improving the resilience of
the labour market, introducing more internal and external flexibility, reducing
segmentation and facilitiating transition between jobs have been introduced in
several Member States, sometimes in consultation with social partners. This is
particularly the case in countries under programmes. Such reforms should
gradually produce their effects. It is important that they take account of the
need to build-up rights for the future and ensure the employability of workers.

Given the EU's demographic situation, reforms also need to focus on
increasing the labour participation of women and older workers by making sure
the tax and benefit systems provide the right incentives to return and stay in
work. Developing early childhood education and care, usually referred to as
childcare, addressing child poverty and preventing early school-leaving are key
instruments to this end. The quality, affordability and accessibility of
related services play a crucial role.

In the short term, the capacity of public employment services to
cope with the rising number of unemployed people is being heavily tested. More
effective job-search assistance and training opportunities, including support
to mobility schemes, is needed in several countries. All the evidence shows
that personalised support produces better results; yet, action in this
direction is not being taken, or not fast enough, in several Member States with
the highest levels of unemployment. Confronted with increasing requirements
public employment services should seek to increase their effectiveness and
enhance their cooperation.

The fundamental right of free movement enshrined in the Treaty
provides employment opportunities. It is one of the possibilities to address
the skills and job mismatch. Labour market mobility also represents an
adjustment mechanism in the EMU. The Commission will build on the European
Employment Service (EURES), intensifying and broadening its activities
including by promoting youth mobility.

Table
2. Unemployment rates and number of persons unemployed, overall and young
people (under 25) – March 2013*

- March 2013 or latest available data

Source: European Commission

A more fundamental assessment is also needed
of how to make the provision of education and training more transparent and
efficient, how to achieve a better match between skills and available jobs and
how to reinforce synergies between the different training providers. The share
of early school leavers, particularly for people with a disadvantaged or migrant
background, remains unacceptably high in several Member States and the
provision of lifelong learning opportunities is sub-optimal. Early school
leaving is above the EU average in MT, ES, PT, IT, RO and UK[9], while BG, RO, EL, HU and SK
have the lowest participation rates in lifelong learning[10]. These problems existed before
the crisis but are especially problematic now in view of the breadth of
economic adjustments taking place, and the prospect of longer working lives.
Skills mismatches and bottlenecks in many regions and sectors are a further
illustration of the inadequacy of certain education and training systems.

Several
Member States have initiated reforms of their vocational education and training
systems to adapt skills and competences of young people to labour market needs.
A number of Member States have established the bases for high quality
apprenticeships and dual vocational training (EL, ES, IT, LV, PT, SK), although
the process is still in initial phases and will need close involvement of social
partners in order to be successful. Others have initiated reforms to increase
the efficiency of their higher education systems to reduce drop-outs and to
adapt them to labour market needs (AT, IT, PL) and increasingly use innovative
performance based funding models to achieve these objectives (CZ, HU, SK, UK).

Young people
have been particularly affected by the rise in unemployment. Important efforts
have been initiated at EU level to support national and regional strategies (Box 5).

Box 5. Implementing the EU Youth Guarantee

Following a proposal from the Commission,
Member States have agreed to put in place a Youth Guarantee to give every young
person under the age of 25 a good-quality offer of employment, continued
education, an apprenticeship or a traineeship within four months of becoming
unemployed or leaving formal education.

Finland has launched a guarantee offering each young person under 25 (under 30
for recent graduates) a job, a traineeship, on-the-job training, a study place,
or a period in a workshop or rehabilitation within 3 months of becoming
unemployed. In Austria, a “Job and Training Guarantee” is in place for young
people aged between 19 and 24. Unemployed young people are offered employment,
targeted training or subsidised employment within the first six months of their
registration with the public employment service. In Sweden, the approach is to
empower the young registered unemployed, starting with three months of
intensified support for job seeking, followed by an active matching process
combined with an apprenticeship or further education.

The Commission has proposed and the
European Council has agreed to launch a Youth Employment Initiative. This
Initiative will make EUR 6 billion available during the next Multi-annual
Financial period (2014 to 2020) to support young people not in employment,
education or training (NEETs) in regions which have a youth unemployment rate
of over 25%. The Initiative can play a key role in supporting the implementation of the Youth Guarantee.

The severe
social impact of the crisis is causing poverty levels to rise in several Member
States. Some are accelerating efforts to tackle poverty and social exclusion,
but there is more to be done to strengthen social safety nets and enhance the
adequacy and cost-effectiveness of benefits, including through better
targeting, administrative simplification and greater take-up of rights. The
long-term unemployed should be supported to reconnect with the labour market,
and better links between social assistance and activation measures are
essential to this effect.

Modernising public administration

The crisis has shown that weaknesses in public administration can
impair the capacity of Member States to implement modern, reform oriented
economic and social policies. From the need to overhaul certain public
employment services to a lack of economic analytical capacity to design and
implement structural reforms, to improve the management and increase low levels
of absorption of EU structural funds, the need to modernise Member State public administrations is clear.

Modernising public administration requires strengthening strategic
design and implementation: ministries and public authorities at national,
regional and local levels should improve their capacities to define key
challenges, identify the main priorities to address these challenges, assess
the economic, social and environmental impact of interventions, and design
appropriate action plans with clear milestones. However, an integrated approach
is crucial: in order to avoid a proliferation of strategies on public
administration reform, the development and implementation of such strategies
should be closely coordinated across all relevant departments.

A modern public administration is an essential factor to underpin
the design and delivery of policies promoting jobs, growth and competitiveness.
The development of an SME friendly environment, for instance, requires i.a. a
reduction of the administrative burden related to the establishment of new
businesses and an administrative framework promoting innovation. This requires
in turn strengthening the administrative capacity of the public authorities,
and supporting online services and modern information infrastructures.

A skilled public administration workforce is important, particularly
in times of crisis with its ensuing squeeze on public financing. What matters
is not only the capacity to attract but also to retain good staff, thereby
safeguarding the attractiveness of public administration. This requires first
and foremost solid recruitment policies, promotion and career development
schemes, the promotion of leadership, through inter alia learning and training.

Some Member States are reducing public sector employment and others
are investing in e-government to increase efficiency and cost-effectiveness.
The crisis has also revealed the negative economic impact of slow and outdated
legal systems and the relevance of the quality, independence and efficiency of
the judiciary for maintaining or regaining investor confidence. Some Member
States are now taking steps to overhaul insolvency laws, to increase the
efficiency of their court systems (Portugal and Spain) but in others (Malta,
Romania, Italy, Slovakia, Hungary, Latvia and Bulgaria) the Commission has made
recommendations for faster and more effective action and/or for measures to
strengthen the independence of the judiciary. Efforts to reform tax
administrations and legislation are also necessary to improve taxpayers'
compliance and reduce administrative and compliance costs.

Box 6. Examples of recent measures to
address tax compliance and improve the efficiency of tax administration

To improve
tax compliance, countries are implementing both voluntary compliance measures
and enforcement policies. The mix varies depending on national circumstances.
BE has quadrupled the penalties for tax fraud and tax authorities have been
granted increased access to personal data. BG introduced additional e-services
and expanded the communication channels with the Information Centre of the
National Revenue Agency, increasing the use of third party information.  CZ
continued working on streamlining the organisation of its tax authority (moving
towards an Integrated Revenue Agency) and enhanced its risk management capacity
by introducing the concept of "unreliable VAT taxpayer". IT on the
one hand increased controls and made sanctions stricter, while at the same time
increasing the information obligations for taxpayers. On the other hand, the
country also took a certain number of simplification measures. LT enhanced its
compliance strategy, increased the assistance provided to taxpayers while also
boosting controls, in particular for cash-based transactions. SK has improved
its risk management techniques with a focus on VAT fraud and took measures to
fight evasion by mandating electronic payments above a certain limit.

4.
Conclusion

The short-term economic outlook for Europe is still weak, but many
of the actions now being taken by Member States are helping to move the EU
beyond the crisis. Current account imbalances are being reduced in the euro
area, and its current account is moving into surplus. Efforts to rebalance the
economy must continue  in all Member States: deficit countries need to boost
their competitiveness, while surplus countries need to remove obstacles to the
growth of their domestic demand.

Structural reforms should be pursued more intensively, as this is no
ordinary cyclical downswing. But it often takes time before the benefits become
concrete and, based on past experience, the employment situation will only
react with a time lag. Active labour market policies are crucial, especially in
combatting youth unemployment. The additional time proposed for fiscal
consolidation for some Member States should be used for the implementation of
ambitious structural reforms to increase adjustment capacity and boost growth
and employment. Greater urgency is needed, including the acceleration of
decisions and the mobilisation of funding at national level, to fight youth
unemployment. The Youth Guarantee Scheme, proposed by the Commission and now
adopted by the Member States, is an important element in this respect and
should be activated rapidly at national level. Finalising agreement on the next
multi annual financial framework, which will provide  additional, dedicated
funding for tackling youth unemployment, must also be a high priority.

Restoring the financial sector's ability to channel savings to their
most productive uses will be important to boost investment levels particularly
for southern Europe.  All possible ways and means at the disposal of the EU
institutions, including the European Investment Bank, should be geared to this
effort, in particular with regard to SME access to finance. It is equally
important for the EU economy to adopt and implement the Multi-annual Financial
Framework 2014-2020. The Commission calls upon the European Parliament and the
Council to reach agreement without delay. In parallel, Member States should
accelerate their preparations for the next Multi-annual Financial Framework so
that EU co-funding of investments and job support measures can be made
available from the beginning of 2014 to support the implementation of the
reforms called for in the country-specific recommendations. In parallel, rapid
progress on the Banking Union is necessary to reinforce confidence. In the
short term we need to ensure that banks' balance sheets are adequately
capitalised to enable them to play their role in financial intermediation and
to contribute to strengthening Europe's growth potential.

The European Semester process is now well established and is working
to deliver more co-ordinated policy making across the EU. It takes the
specificity of each country into account while at the same time developing
synergies across countries, recognising the interdependence between members of
the EU. For the 2013 exercise the Commission stepped up its political and
technical contacts with Member States and many Member States made a greater
effort to involve national parliaments, the social partners and civil society
in developing and discussing their national reform programmes. National
ownership of the reform process will be crucial to its succcess.

Europe is undertaking a wave of reforms which will
enable new, sustainable and job-rich growth to emerge. We cannot lower our
guard in responding to these challenges at national and at EU-level.
Implementing structural reforms will be Europe's joint agenda for the coming
months. Acting together at EU and national level we can move Europe beyond the
current crisis and onto a path of smart, sustainable and inclusive growth.

Annex
1 - Overview of country-specific recommendations for 2013-2014

Note:
Commission's recommendations presented on 29 May 2013 for 2013-2014. Cyprus, Greece, Ireland and Portugal should implement commitments under EU/IMF financial assistance
programmes. More information at : http://ec.europa.eu/europe2020/index_en.htm

Annex
2 – Overview of Europe 2020 targets[11]

*Countries that have expressed their
national target in relation to an indicator different than the EU headline
target indicator

Member States targets || Employment rate (in %) || R&D in % of GDP || Emissions reduction targets (compared to 2005 levels)[12] || Renewable energy || Energy efficiency[13] || Early school leaving in % || Tertiary education in % || Reduction of population at risk of poverty or social exclusion in number of persons

EU headline target || 75% || 3% || -20% (compared to 1990 levels) || 20% || 20% || 10% || 40% || 20,000,000

Estimated EU || 73.70-74% || 2.65-2.72% || -20% (compared to 1990 levels) || 20% || n.a || 10.3-10.5% || 37.6-38.0%[14] ||

AT || 77-78% || 3.76% || -16% || 34% || 31.5 || 9.5% || 38% (including ISCED 4a, which  in 2010 was  at about 12%) || 235,000

BE || 73.2% || 3.0% || -15% || 13% || || 9.5% || 47% || 380,000

BG || 76% || 1.5% || 20% || 16% || || 11% || 36% || 260, 000*

CY || 75-77% || 0.5% || -5% || 13% || 2.8 || 10% || 46% || 27,000

CZ || 75% || 1% (public sector only) || 9% || 13% || || 5.5% || 32% || Maintaining the number of persons at risk of poverty or social exclusion at the level of 2008 (15.3% of total population) with efforts to reduce it by 30,000

DE || 77% || 3% || -14% || 18% || 251.0 || <10% || 42% (including ISCED4 which in 2010 was   at 11.4%) || 320, 000 (long-term unemployed)*

DK || 80% || 3% || -20% || 30% || 17.8 || <10% || At least 40% || 22,000 (persons living in households with very low work intensity)*

EE || 76% || 3% || 11% || 25% || 6.5 || 9.5% || 40% || 61,860 people out of risk-of-poverty*

EL || 70% || 0.67% || -4% || 18% || 27.1 ||  under 10% || 32% || 450,000

ES || 74% || 2% || -10% || 20% || 121.6 || 15% || 44% || 1,400,000-1,500,000

FI || 78% || 4% || -16% || 38% || 35.9 || 8% || 42% (narrow national definition) || 150,000

FR || 75% || 3% || -14% || 23% || 236.3 || 9.5% || 50% || No new target for the time being (the target was valid until 2012) *

HU || 75% || 1.8% || 10% || 14.65% || 26.6 || 10% || 30.3% || 450,000

IE || 69-71% || approx.2%- 2.5% of GNP || -20% || 16% || 13.9 || 8% || 60% || 200,000*

IT || 67-69% || 1.53% || -13% || 17% || 158.0 || 15-16% || 26-27% || 2,200,000

LT || 72.8% || 1.9% || 15% || 23% || || <9% || 40% || 170,000

LU || 73% || 2.3-2.6% || -20% || 11% || || <10% || 66% || 6,000

LV || 73% || 1.5% || 17% || 40% || 5.23* || 13.4% || 34-36% || 121,000*

MT || 62.9% || 0.67% || 5% || 10% || 0.825 || 29% || 33% || 6,560

NL || 80 % || 2,5 % || -16% || 14% || . || <8 % || >40% 45% expected in 2020 || 93,000*

PL || 71% || 1.7% || 14% || 15.48% || 96.4 || 4.5% || 45% || 1,500,000

PT || 75% || 3% || 1% || 31% || 22.5 || 10% || 40% || 200,000

RO || 70% || 2% || 19% || 24% || || 11.3% || 26.7% || 580,000

SE || Well over 80% || Approx. 4% || -17% || 49% || 36.7-66.0 || <10% || 40-45% || Reduction of the % of women and men who are not in the labour force (except full-time students), the long-term unemployed or those on long-term sick leave to well under 14% by 2020*

SI || 75% || 3% || 4% || 25% || || 5% || 40% || 40,000

SK || 72% || 1.2% || 13% || 14% || 16.2 || 6% || 40% || 170,000

UK || No target in NRP || No target in NRP || -16% || 15% || 177.6. || No target in NRP || No target in NRP || Existing numerical targets of the 2010 Child Poverty Act*

HR[15] || 59% || 1.4% || +26% || 20% || || 4% || 35% || 100,000

[1]               First the EFSM and EFSF and subsequently the ESM

[2]               In December 2012, the Commission presented a
comprehensive set of actions to combat tax fraud and evasion on a European and
global scale. http://ec.europa.eu/taxation_customs/taxation/tax_fraud_evasion/index_en.htm

[3]               COM (2013) 150

[4]               Imbalances for these countries have been identified
in this area under the Macro-economic Imbalances Procedure.

[5]               In 2013 Member States have started to obtain new
revenues from the auction proceeds of emission trading allowances which can be
used for financing low-carbon innovative projects

[6]               See: http://ec.europa.eu/economy_finance/publications/economic_paper/2012/pdf/ecp_456_en.pdf

[7]               Two Member States have not communicated their
indicative energy efficiency targets as required under articles 3 and 24 of the
Energy Efficiency Directive (2012/27/EU) and nine Member States have made
incomplete communications.

[8]               See: http://ec.europa.eu/environment/waste/studies/pdf/study%2012%20FINAL%20REPORT.pdf

[9]               See: http://ec.europa.eu/europe2020/pdf/themes/21_early_school_leaving.pdf

[10]             See: http://ec.europa.eu/europe2020/pdf/themes/22_quality_of_education_and_training.pdf

[11]             The national targets as set out in the National Reform
Programmes in April 2013.

[12]             The national emissions
reduction targets defined in Decision 2009/406/EC (or "Effort Sharing
Decision") concern the emissions not covered by the Emissions Trading
System. The emissions covered by the Emissions Trading System will be reduced
by 21% compared to 2005 levels. The corresponding overall emission reduction
will be -20% compared to 1990 levels.

[13]             The Energy Efficiency Directive 2012/27/EU sets out in
article 3(1)(a) that the European Union 2020 energy consumption has to be of no
more than 1474 Mtoe primary energy or no more than 1078 Mtoe of final energy.
All but two Member States (the Czech Republic and Luxembourg) have set their
targets by 30 April 2013, but not all expressed these targets in primary and
final energy level as requested by the Directive. This explains why data for
some Member States and the EU level estimate are missing. This table only
reports on primary energy consumption levels in 2020 expressed in Mtoe. '*'
indicates that the target is preliminary.

[14]             Calculation does not include ISCED 4 (Germany, Austria).

[15] Croatia submitted a list of preliminary national 2020 targets. Given
their preliminary nature, they are not included in the EU-wide estimates.